U.S. Energy Rigs Gain 13 to 1,791, Baker Hughes Says

Aug. 16 (Bloomberg) -- Oil and gas rigs in the U.S. reached the highest level this year as producers boosted drilling to profit from a $10-a-barrel surge in crude prices over the past two months.

Oil rigs rose for the first time in three weeks, adding 12 to 1,397, data posted on Baker Hughes Inc.’s website show. Gas rigs gained by two to 388, the Houston-based field services company said. Miscellaneous rigs fell by one to six.

The total U.S. count is down 123 from a year earlier as producers use more efficient and mobile equipment to bore multiple wells off drilling pads, cutting rig times and helping boost domestic crude production to the highest level in more than 23 years. The surge in output helped the U.S. meet 87 percent of its energy needs in the first four months of 2013, on pace to be the highest annual rate since 1985.

“We’re finally seeing oil rigs reflect higher prices,” James Williams, president of WTRG Economics in London, Arkansas, said by telephone. “We should expect continued strength in oil drilling while gas will probably stay fairly flat.”

Crude for September delivery gained 13 cents to settle at $107.46 a barrel on the New York Mercantile Exchange, up 13 percent in three months and 12 percent in the past year.

Rising Output

U.S. oil output climbed 11,000 barrels a day to 7.57 million, the highest level since December 1989, according to the Energy Information Administration. Stockpiles fell a second week, losing 2.81 million barrels to 360.5 million, a seven-month low.

North Dakota’s portion of the Bakken shale formation, the largest unconventional oil field in the U.S., posted a 1.4 percent increase in production in June, according to the state’s Industrial Commission. Output increased to a record 756,980 barrels a day, from 746,340 in May.

Rigs in North Dakota gained by one this week to 172, a one-month high, according to Baker Hughes. The count probably won’t rise above 190 because improvements in drilling efficiency are weakening demand for the equipment, Lynn Helms, director of North Dakota’s Department of Mineral Resources, said in a conference call yesterday from Bismarck, North Dakota.

“Rigs have become so efficient that they’re capable of drilling as many or more wells as completion crews can complete,” he said. “So there really is not a need to increase the rig count beyond 185 to 190. There just is no economic driver for that.”

Drilling Costs

EOG Resources, the biggest owner of drilling rights in the Eagle Ford Shale in southwest Texas, lowered its average cost of completing a well in Texas’s Eagle Ford shale play to $5.5 million from $6 million through drilling improvements, William Thomas, the Houston-based company’s chief executive officer, said in an conference call with investors Aug. 7.

EOG increased the number of wells it plans to drill this year to 440 from 425, he said.

Directional rigs targeting oil, typically used to bore multiple wells off the same pad or close by, rose by six to 197, a four-week high. Horizontal rigs jumped by 12 to 812.

Oil and gas permits in the Eagle Ford play rose in the second quarter by 12 percent to 1,278, the second consecutive quarterly increase, according to data compiled by Bloomberg. Oil permits rose by 54 percent while gas permits dropped 17 percent, Bloomberg Industries said in an analysis yesterday.

Natural Gas

Natural gas for September delivery fell 5.1 cents, or 1.5 percent, to $3.368 per million British thermal units today on the Nymex, up 24 percent from a year ago.

U.S. gas stockpiles gained 65 billion cubic feet last week to 3.006 trillion, bigger than the five-year seasonal average increase of 42 billion, the Energy Information Administration said yesterday.

Louisiana added the most rigs this week, rising by five to 113. Texas dropped the most, losing three to 846.

Rigs on land jumped by nine to 1,706, the highest count this year. Rigs in inland waters slipped by one to 23. The offshore rig count gained five to 62, the highest level since February 2009. Rigs in the Gulf of Mexico rose by four to 59, also the most since 2009.

Energy rigs in Canada were unchanged at 358.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net